Opinion
May 4, 1940.
FRAUD: Sale Under Benefit Assessments: Inadequate Consideration. In an action by a grantee under the original owner of land against a claimant under a special benefit assessment deed to cancel the sheriff's deed and deeds of trust made by defendant's grantor, where the price paid at the sheriff's sale was $85 and the evidence showed the land was worth from $3600 to $5000, a finding by the chancellor that transactions in which the purchaser at the sheriff's sale and the grantees engaged were a scheme to cloud the title is sustained by the evidence.
Where a lot is sold for a grossly inadequate consideration that in itself is fraud in law.
When after such sheriff's sale the purchaser and the grantees withheld their deeds from the record in a manner to conceal the transaction, it was further evidence of fraud.
Appeal from Circuit Court of City of St. Louis. — Hon. William S. Connor, Judge.
AFFIRMED AND REMANDED ( with directions to modify the decree).
E.H. Wayman, Jno. T. Hicks, and Frances J. Sullivan for City of St. Louis.
(1) Respondent or her predecessors in title had due notice of the proceeding for the change of grade in which respondent's property was assessed a benefit by the commissioners appointed in said change of grade suit, which assessment resulted in a benefit judgment against respondent's property. Sec. 58, Art. XXI, St. Louis Charter; St. Louis v. Ranken, 96 Mo. 505; Buddecke v. Ziegenheim, 122 Mo. 243; Eyssell v. St. Louis, 168 Mo. 616; St. Louis v. Calhoun, 222 Mo. 44; Schwab v. St. Louis, 310 Mo. 116. (2) Respondent's notice to the collector of revenue of the city of St. Louis where said respondent could be notified of taxes due on her property was not notice to appellant city of St. Louis with respect to special benefit assessments, as said collector of revenue is a State officer and said notice to said collector was not binding on this appellant. Secs. 9883, 10004, R.S. 1929. (3) Appellant city of St. Louis is not under any legal obligation to notify property owners that their property is assessed a special benefit under Article XXI, of the charter of the city of St. Louis. (4) Respondent was duly notified that said property was to be sold by the sheriff pursuant to the notice of said sale in accordance with the statutes. Sec. 1198, R.S. 1929. (5) Respondent had the opportunity to move the court, granting the motion of appellant for execution, to set aside the sale made thereunder during the return term. St. Louis v. Miller, 82 S.W.2d 579; St. Louis v. Del Place Realty Co., 259 Mo. 140. (6) Inadequacy of price is not sufficient grounds to set the sale aside, especially since said sale was properly and fairly conducted. Wagner v. Phillips, 51 Mo. 117; Million v. McRee, 9 Mo. App. 344; Walters v. Hermann, 99 Mo. 529, 12 S.W. 890; Briant v. Jackson, 99 Mo. 585, 13 S.W. 91; Knoop v. Kelsey, 121 Mo. 642, 26 S.W. 683. (7) The notice published by the commissioners pursuant to Section 5 of Article XXI and the sale under the special execution pursuant to Section 1198, Revised Statutes 1929, constituted due process of law. Lohman v. Stocke, 94 Mo. 672; Harness v. Cravens, 126 Mo. 233; Harper v. Hopper, 42 Mo. 124; Young v. Schofield, 132 Mo. 650, 34 S.W. 497; Buchanan v. Atchison, 39 Mo. 503.
Anne M. Evans, Newell S. Ferry, Jr., and Atwood Atwood for Anne M. Evans, Henry Ernst and Sarah Ernst.
(1) The general plan of the charter of the city of St. Louis, with respect to proceedings for the condemnation of private property for public use, the method of determining and assessing the damages for private property so taken or damaged, and the assessment of benefits against private property not taken or damaged, in order to create a fund out of which to pay the damages assessed is composed of two parts, separate in their legal aspects, yet combined together in the one action to make a complete and efficient procedure. The condemnation process contemplates a suit filed in the circuit court, naming as defendants therein those parties whose property is to be actually taken or used in the manner determined. This procedure is a judicial procedure, in which the rules of judicial action obtain. The parties are named and the property described; where service of summons cannot be had personally an order of publication is issued bringing in those necessary, but unserved, defendants. If no answers are filed default and inquiry is granted as in any ordinary lawsuit. If answers are filed the matter is tried and the damages determined in this legal manner. The assessment of special benefits, however, is not a judicial act, but is quasi judicial. The Legislature and the city charter require this to be done through the agency of the circuit court. The commissioners appointed by the circuit court in the condemnation suit are required to determine the district benefited by the purposes of the condemnation suit, and publish notice to the owners of property within that district, not named in the suit, and whose property is not being taken; this order of notification, required and specified by the city charter, names and specifies only the boundaries of the benefit district, and does not name the owners of the property therein. This is all the notice required by law. The owners' names are not required in the notice, nor a further description of the property. Minor irregularities in the judgment, such as referring to property in one place as item 94 and in another as item 103, not called to the attention of the trial court, and not corrected nor objected to within three years thereafter, cannot be complained of now. No default and inquiry is granted in this quasi judicial part of the condemnation suit, as the assessment of special benefits is not a judicial action. It is not necessary under either the State or the Federal Constitutions that the legislative act creating a benefit district provide any notice whatsoever to the landowners. But where notice is required by the statute or charter by authority of which the assessment is made, that notice must be given. Under the charter of the city of St. Louis this notice is required, and is stated in Section 5, Article XXI, as follows:. ". . . publish in said newspaper for ten days before beginning their assessment a notice of the boundaries of the benefit or taxing district, and of the time and place. . . ." Art. XXI, Charter of the City of St. Louis; Schwab v. St. Louis, 274 S.W. 1058; St. Louis v. Bell Place Realty Co., 259 Mo. 126; Kansas City v. Field, 226 S.W. 27; Kansas City v. Jones Store Co., 28 S.W.2d 1008; St. Louis v. Senter Comm. Co., 84 S.W.2d 21, Id., 84 S.W.2d 139; Little River Drainage District v. Railroad Co., 236 Mo. 94; Houck v. Little River Drain. Dist., 239 U.S. 254; Walker v. Mills, 210 Mo. 684. (2) This statutory notice, when given, is binding on all persons interested in the property within the benefit district, and on all who acquired their interest, after the judgment is rendered, as pendente lite purchasers. Cases under point (1). Bishop of Winchester v. Paine, 11 Ves. 194; Murray v. Ballou, 1 Johns. Ch. 577; Carr v. Cates, 96 Mo. 274; O'Reilly v. Nicholson, 45 Mo. 160; Real Estate Sevs. Inst. v. Colonius, 63 Mo. 290; McIlwrath v. Holander, 73 Mo. 105; Becker v. Stroeher, 167 Mo. 306; Tice v. Hamilton, 188 Mo. 298; Mo. State Life Ins. Co. v. Russ, 214 S.W. 860; Tice v. Edmonston, 210 Mo. 411; Alexander v. Haffner, 323 Mo. 1197. The following were mechanics' lien cases: Kurtz v. Fields, 14 S.W.2d 9; Tull v. Fletcher, 196 S.W. 436; Brown v. Davis, 249 S.W. 696; McCray Lbr. Co. v. Standard Const. Co., 285 S.W. 104; Evans v. Dockins, 40 S.W.2d 508.
Hall Todd for respondent.
(1) While respondent does not concede that the city's lien judgment was binding on respondent or her privies in title, still as the city has its judgment, interest and costs, and appellant Evans has been allowed credit for the $85 paid to the sheriff, the question as to whether or not the special benefit assessment bound the property of respondent is a moot question, and it is elementary law that this Honorable Court will not pass on moot questions. The owner of real estate sought to be sold for taxes, general or special, is protected by the same principles as execution defendants whose land is to be sold on general or special judgments. Before their property may be sold, the owner must have actual notice. Sec. 824, Am. Jur.; Black v. Banks, 37 S.W.2d 596; Mahen v. Tavern Rock, 37 S.W.2d 564. (2) Although equity cases on appeal are tried by the Supreme Court de novo, the court will defer to the findings of the chancellor on disputed questions of fact where sustained by substantial evidence in the record. Secs. 900, 912, Am. Jur. (3) Although notice to the collector might not be constructive notice to the city, the notice given to the collector by respondent became actual notice when the comptroller's assistant obtained respondent's address from the collector. In controversies over property rights, knowledge of facts is notice if by inquiry such facts are or can be ascertained. Stewart v. Ramsay, 196 Mo. 417. (4) Where real property belonging to a defendant who resides in Missouri, but not in the subdivision of the State where the property is situated, and neither the owner nor her privies in title were served as a defendant or appeared in the suit in which an execution is issued under which such real property is to be sold, the execution plaintiff is required to cause written notice of the issuance of the execution and to what term returnable to be served on the execution defendant or other owner of the real estate as required by Section 1200, Revised Statutes 1929, and return of service to be filed in office of the clerk of the court from which the execution was issued before the execution plaintiff may proceed to have the real property of the execution defendant, so situated, sold to satisfy the judgment, as required by Section 1201, Revised Statutes 1929. Unless notice is served as required by Section 1200, Revised Statutes 1929, and return filed as required by Section 1201, id, real property of a resident of Missouri residing in another part of the State is not subject to sale under execution. Young v. Schofield, 132 Mo. 667; Black v. Banks, 37 S.W.2d 598; Mahen v. Tavern Rock, 37 S.W.2d 564. (5) Inadequacy of the price paid for real property at a sheriff's sale under execution will not alone justify a court of equity in setting aside the sale unless the price paid is so low as to shock the conscience of the chancellor. The sheriff owes to the owner a duty to see that property which he sells under execution is not sacrificed. Inadequacy of the price paid for real property at a sheriff's sale under execution, in connection with other facts tending to show fraud or unfairness on the part of the purchaser at the sale, will justify a chancellor in setting aside a sheriff's sale and in cancelling the sheriff's deed. Black v. Banks, 37 S.W.2d 598; Davis v. McCann, 143 Mo. 178; Van Graffeland v. Wright, 228 S.W. 468, 286 Mo. 414; Mangold v. Bacon, 237 Mo. 523; Ellis v. Powell, 117 S.W.2d 226.
Equity to set aside a sale made under an execution issued on a special benefit assessment judgment; to cancel the sheriff's deed made pursuant to said sale; to cancel a deed made by the execution purchaser; to cancel two deeds of trust made by the execution purchaser's grantees in connection with said purchase; to quiet title in plaintiff, and for certain additional relief contingent on the outcome of the main controversy. Decree and judgment nisi for plaintiff, conditioned upon plaintiff doing equity. Defendant's separate appeals are consolidated for disposition. From the view we take of the case a discussion of each of the several issues briefed is unnecessary.
In 1922 Sarah Ida Jackson was the owner of the real estate involved — a lot improved by a dwelling in the city of St. Louis and commonly known as 6900 Wise Avenue. Returnable to the December Term, 1922, of the circuit court, the city of St. Louis instituted a proceeding for certain improvements of Clayton Avenue, and the assessment of damages and special benefits ensuing therefrom. Respondent's brief, without conceding the City's lien judgment for special benefits against the real estate was binding on respondent, states that since respondent must do equity and the City has its judgment, interest and costs and the execution purchaser has been allowed credit for the execution sale price, the issue with respect to the validity of the special assessment benefit against the real estate has become moot, and we do not detail the facts connected therewith. Mrs. Jackson and her husband conveyed said lot by warranty deed, dated June 17 and recorded June 18, 1925, to Eleanora A. Gutsch, who executed a deed of trust against the lot to secure a three-year $2500 note.
On May 5, 1925, the Commissioners appointed to ascertain the damages and special benefits in the proceedings for the improvement of Clayton Avenue filed their report, assessing a special benefit of $7.50 against said lot; and on September 21, 1925, final judgment was entered in said proceeding approving said report, and to the effect that the city of St. Louis recover $7.50, and that said sum constitute a first and special lien upon the property of Mrs. Jackson, or the owner or owners thereof, to-wit: the lot here involved.
Eleanora A. Gutsch, single and unmarried, conveyed the lot by warranty deed, dated and recorded November 9, 1925, to George M. Lindsay " or" Charlotte C. Lindsay, subject to general and special taxes for the year 1925 and thereafter and the aforesaid $2500 deed or trust. The Lindsays paid the $2500 indebtedness in 1927. The Lindsays later conveyed to Lena Clark, mother of Mrs. Lindsay, and on January 10, 1929, Lena Clark, by quitclaim deed, conveyed the lot to Charlotte C. Lindsay, respondent here.
Under special execution, dated August 2, 1935, issued on the aforesaid judgment for $7.50, the sheriff of the city of St. Louis, on September 14, 1935, sold the lot at public sale to Anne M. Evans, appellant, for $85, and in due course made, executed and delivered to said purchaser a sheriff's deed to said lot, which deed was dated September 30, 1935, and was recorded October 5, 1935.
On September 20, 1935, six days subsequent to said sale, Mrs. Lindsay paid delinquent taxes on the property for the years 1932, 1933 and 1934. By warranty deed dated March 7 and recorded March 9, 1936, appellant Evans conveyed the lot to appellants Henry and Sarah Ernst, husband and wife; of which transaction more hereinafter. Miss Evans then called at the office of the Burian Realty Company, which had been acting as rental agent for Mrs. Lindsay, and, according to the testimony of officers of the company, stated she had acquired the property at a sheriff's sale, presented the sheriff's deed, and wanted the company to take charge of the property and collect the rents. The Burian Realty Company thereupon notified Mrs. Lindsay and this action followed.
While appellants contend there was due service of process so as to subject the lot to the special assessment judgment, the record establishes that respondent did not have actual knowledge of the proceedings for the improvement of Clayton Avenue or of the execution sale prior to her notification by the Burian Realty Company.
The transfer of the lot to the Ernsts was effected in this manner. One J.E. Hanger executed two unsecured notes — a $3000 and a $600 note — to Mr. Ernst. Miss Evans deeded the property by warranty deed to the Ernsts, the recited consideration being $1 and other considerations. Mr. Ernst paid Miss Evans $1. She gave him the deed and he gave it back; he said for safe-keeping. He delivered to her the two notes executed by Mr. Hanger. Mr. and Mrs. Ernst executed two deeds of trust on the lot to B. Hanger, daughter of J.E. Hanger, as trustee for J.E. Hanger. One deed of trust purported to secure a principal note of $3000, payable three years after date; the other purported to secure six notes of $100 each, "due one each month." Mr. Hanger testified that when he gave Mr. Ernst his two notes Mr. Ernst gave him the two deeds of trust; that he did not see any notes secured by the deeds of trust; that he did not owe Mr. Ernst anything; that he received his information from Miss Evans; that he did not go out to inspect the property; that Miss Evans brought Mr. Ernst over; that after he found out there was going to be some trouble he got in touch with Miss Evans; that about a week or so after he received the deeds of trust he delivered them to Miss Evans and received his two notes, which he destroyed; and that he gave Miss Evans "two deeds of trust with no notes." Mrs. Ernst testified she had never seen the property; that her husband does all kinds of repair work, "an odd-job man," and earns approximately $12 a week; that Mr. Ernst expected to pay for the property out of his earnings and its rentals, and that they do not own the property they live in. Mr. Ernst testified he saw the property the day he purchased it but never inspected it; that he saw it first, he thought, in August, 1936; that he was willing to pay $3600 for it; that he bought it for speculation; that Miss Evans never delivered the warranty deed back to him or his wife; that he has had the deed continuously in his possession ever since he bought the place; that when he stated J.E. Hanger owed him $600 he misstated his testimony; and that one of the deeds of trust was for $2500 and the other was for the difference between $2500 and $3600. Miss Evans testified by deposition and in person at the trial. We take the following: After suit was instituted, she, in St. Louis County, gave the deeds of trust to a party from Wisconsin. She does not remember what she received for them. (We find no consideration for the transaction of record.) She does not remember the name of the person or whether a man or woman. "I sent it up there [meaning Wisconsin] to them." She does not know the name of the town. At the time of the trial she held the deeds of trust as attorney. They were not her property. She still had an interest in "it." She could not tell to whom she was looking for payment of her interest in the Evans-Hanger-Ernst transaction. There may be other testimony of record upon which to base a finding that said transaction was a scheme to cloud the title; but the foregoing sustains the chancellor's finding that the Ernsts and the Hangers acted as "straw parties"; that as between them and Miss Evans, Miss Evans had the sole beneficial claim to the lot, and that she likewise held the deeds of trust.
Of the execution sale price and incidental matters. The chancellor nisi found the lot worth $5000. Experienced realtors valued the property, as of the execution sale date, at between $4000 and $5000. Appellant Evans considered the property worth $3600, the purported sale price to the Ernsts. A finding that the execution sale price of $85 was approximately two per cent of the value of the property sold is well within the record made.
In Ellis v. Powell (Mo.), 117 S.W.2d 225, 226[2] land considered worth $300 was sold for $8.50 under a judgment for $68.54 taxes and $27.90 costs. In sustaining a decree setting aside the deed, GANTT, J., said: "In other words, the lot was sold for less than three per cent of said value. Thus it appears that the consideration of $8.50 is so grossly inadequate as to amount, in itself, to a fraud in law."
Miss Evans' bid of $85 covered the judgment, interest and costs. Appellants say there is no Missouri case on motion or in equity setting aside an execution sale solely on the inadequacy of consideration where the bid covered the tax judgment, interest and costs. This may be. They rely upon Mangold v. Bacon, a case before court en banc on three occasions ( 229 Mo. 459, 130 S.W. 23; 237 Mo. 496, 141 S.W. 650; 249 Mo. 48, 155 S.W. 393) and involving a judgment of $14.99 for taxes, etc., and the sale of land worth $1000 to $1200 for $12.50, and other equities. They direct our attention to portions of the opinions of the late lamented Judge LAMM on the first and the second appeal wherein he stresses the fact that the consideration was insufficient to pay the taxes or the costs (237 Mo. l.c. 520, 521, 523, 524, 141 S.W. l.c. 656, 657, 658; 229 Mo. l.c. 491, 492, 494, 130 S.W. l.c. 33, 34). It is not a matter of amazement that so cautious a judge, in meeting the contention that there was no precedent by the statement: "Be it so. But if there be none it is time to make one" (229 Mo. l.c. 492), should expressly limit his discussion, as in many other instances, to the particular facts involved. This is especially apropos of a cause in equity, wherein the proper exercise of a passion to administer justice not afforded at law permits the chancellor to consider, relaxed from the rigid rules of law, the kernel rather than the legal shell of the particular controversy. Appellants' position involves a non sequitur. There is no such affinity between the amount of a tax judgment, interest and costs and the worth of the property subject thereto upon execution as to necessarily constitute the one a criterion for the other. The fact that the execution purchase price is less than the tax judgment, interest and costs may tend to establish a fraud upon the State or one of its subdivisions. If so, it becomes a supporting and additional rather than an essential probative factor establishing the necessary inadequacy of consideration to invalidate the sale.
Mangold v. Bacon, 237 Mo. l.c. 522, 144 S.W. l.c. 657 (quoting Guinan v. Donnell (Banc), 201 Mo. 173, 202, 98 S.W. 478, 484, and citing authority), states the rule, with its qualification: "`It has always been held by this court that inadequacy of price alone will not justify the setting aside of a sheriff's sale of real estate under execution, unless the price is so inadequate as to shock the moral sense and outrage the conscience. The courts will interfere to promote the ends of justice'"; and applied the qualification to the facts there involved. This is developed arguendo, and not repeated here, with respect to Missouri authorities in Van Graafieland v. Wright, 286 Mo. 414, 425, 228 S.W. 465, 468[3, 4]. That case, although not passing off on the inadequacy of the consideration at the execution sale, involved a sale for $87.50, the amount of the judgment and costs of sale; but the observations there made with respect to the inadequacy of the consideration have been cited with approval in subsequent cases. State ex rel. v. Elliott, 114 Mo. App. 562, 566, 90 S.W. 122, 123, states, absent a right to redeem, "courts will apply the same rule to tax sales as applied to sales under ordinary judgments." The instant case does not involve a judgment for general taxes. Consult, also, Hannibal St. J. Rd. Co. v. Brown, 43 Mo. 294, 297; Mitchell v. Jones, 50 Mo. 438; Davis v. McCann, 143 Mo. 172, 177, 44 S.W. 795, 796; Siela v. Kneib (Mo.), 176 S.W. 1052, 1054[1]; State ex rel. v. Nathan (Mo.), 229 S.W. 176, 177[2].
Of other cases stressed by appellants: In Uhrig v. Hill-Behan Lumber Co., 341 Mo. 851, 860, 110 S.W.2d 412, 417, the argument was that "the low price," coupled with other alleged factors, should shock the conscience of the court; plaintiffs stating "the sale price `is admittedly not so inadequate as to justify the setting aside of the sale' on that ground alone." In Rogers v. Dent, 292 Mo. 576, 583, 586(II), 239 S.W. 1074, 1075, 1077[5], the weight, in fact practically the only testimony of probative value, established that the 40 acres, which sold for $48, was worth $1 an acre.
The execution deputy sheriff testified three sales were conducted on September 14, 1935, and resulted in prices of between $84 and $123. This, the average price, does not establish any relation between the price and the worth of any given property. A material factor — the worth of the property — on the issue of inadequacy of price is lacking. Furthermore, two or more unconnected wrongs do not justify any one or all of said wrongs. Appellants' contention in this respect is denied.
Courts have been circumspect in their language respecting the effect of an inadequacy of consideration upon execution and judicial sales; but, as stated by GOODE, J., in the early case of State ex rel. v. Innes (1909), 137 Mo. App. 420, 425, 118 S.W. 1168, 1169, "their bark is worse than their bite" and they have diligently searched for and nearly always found some circumstance to save their face while preventing confiscation. So, in the instant case: The sale was made at the September Term, 1935, of court; and respondent, during the pendency of said term, had a remedy by motion to seek to vacate the sale. [City of St. Louis v. Miller, 336 Mo. 1122, 82 S.W.2d 579, and cases there cited. See also, State ex rel. v. Davidson, 315 Mo. 549, 286 S.W. 355; State ex rel. v. Sanders, 326 Mo. 76, 30 S.W.2d 986.] (Appellant Evans was an interested party in St. Louis v. Miller, supra.) She viewed the property the day after the sale and recorded her deed October 5, 1935; but took no further step to assert ownership until the consummation of her transaction with the Ernsts. The trial court found Miss Evans knew respondent had no actual knowledge her property had been sold and that Miss Evans' delay in asserting ownership was for the purpose of depriving respondent of her remedy at law by motion. This, as well as the fact that Miss Evans was of opinion such a motion would result in setting the sale aside, is fully supported by the record. She testified that on account of her experience in St. Louis v. Miller she purposely waited until the expiration of the September Term, 1935, of court before actually making known her ownership to parties adversely interested. She permitted Mrs. Lindsay to collect the rents for the months of October, November, December, 1935, and January and February, 1936. This was not in the usual and ordinary course of business. The recording of the sheriff's deed was ineffective to destroy respondent's right to relief by timely motion. [Consult State ex rel. v. Wessell, 237 Mo. 593, 610(III), 141 S.W. 883, 888[4].]
Other matters are presented by respondent to sustain the judgment nisi. It would serve no useful purpose to discuss them. We therefore, for instance, overrule respondent's motion to dismiss the appeal of appellants Evans and Henry and Sarah Ernsts.
The judgment is affirmed and the cause is remanded with directions to modify the decree nisi and base the relief granted respondent upon the issue of inadequacy of price and the actions of defendants Evans, Hanger, and the Ernsts as herein discussed. Cooley and Westhues, CC., concur.
The foregoing opinion by BOHLING, C., is adopted as the opinion of the court. All the judges concur.